Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Yesterday news broke that Uber’s CTO Thuan Pham would leave the company (confirmed), and that the American technology giant is contemplating a huge staffing cut to reduce its cost structure. COVID-19 has changed how much people move around, hampering the ride-hailing company’s business.
If the cuts come to pass at the scale The Information reports is possible, they would be the steepest layoffs that we’ve heard of at Uber. And they would cap a reversal in fortune the company, which after a somewhat rocky IPO was enjoying fresh momentum in the later parts of 2019 and the start of 2020.
This morning we’re going back in time to rewind through Uber’s post-IPO financial timeline. The company reports earnings on May 7, 2020, a little over a week from today. With that event coming up, we’d best be caught up.
Uber’s last year
It’s hard to choose where to start today. We could go all the way back to Uber’s May 2019 IPO, for example. Instead, we’re going to kick off a month later (it will be clear why in a moment). Also we must be somewhat summary in the following, so not everything that happened is included. We’re only talking about the bits we need most. Let’s go:
July 2019: Ahead of its Q2 2019 earnings report, Uber laid off hundreds of staff in its marketing department. At the time, profitability concerns were circling Uber as its growth decelerated. The cuts, ahead of reporting results, could have been read as a signal to investors that the firm was aware of their concerns.
August 2019: In their now-regular quarterly earnings duel, Lyft grew faster than expected and lost less money than investors expected. Uber did the opposite. GAAP revenue was up a meager 14%, while its adjusted net revenue grew a more anemic 12%. Worse, Uber’s IPO costs pushed it into shockingly negative earnings territory, including operating and net losses of more than $5 billion. Its share fell.
October 2019: Lyft tells the market that it expects to generate positive, adjusted EBITDA by the final quarter of 2021. The company claimed at the time that this was a year ahead of expectations. Lyft also reported better than expected Q3 earnings, with slimmer losses and more revenue than investors had anticipated.
November 2019: Uber makes a profitability promise of its own, one that was slightly better than Lyft’s own. Instead of promising positive, adjusted EBITDA by Q4 2021, Uber tells investors that it expects full-year adjusted profits in 2021. Uber’s Q3 featured revenue growth acceleration and results that bested expectations.
February 2020: Uber’s Q4 earnings come in. The firm posts a modest revenue beat and a more substantial reduction in losses, when compared to investor expectations. Its shares rose. Even better, the company boosted its profitability promise, stating that it now anticipated positive, adjusted EBITDA by Q4 2020. This was a sharp improvement on its prior promise.
February 2020: Lyft reports its Q4 results after Uber reported its own. Lyft beat revenue and adjusted profit expectations, but its shares still dipped after the news. Uber’s promise of quicker profitability (of a sort) had changed investor expectations, it appeared, and when Lyft failed to update its profit guidance investors seemed a little let down.
March 2020: A few days ahead of what would prove to be an early nadir in the value of the tech-heavy Nasdaq equities index, I noted that Uber and Lyft’s respective share prices were under fire. Lyft was off around 80% from its 52-week highs, while Uber was down around 64%. The economy was slipping, and around the world people weren’t traveling. Surely that meant that Uber and Lyft were getting cut to pieces?
March 2020: Two days later, Uber calls a conference and tells analysts that even if its ride-hailing business dropped 80% in the year, it would exit 2020 with $4 billion in cash and a $2 billion credit line. The mission was to tell investors that all will be well and that the company had more than enough cash to survive the downturn.
March 2020: As TechCrunch reported the next day after the chat, investors were stoked. Uber and Lyft shares skyrocketed, with Uber’s good news encouraging the market that Lyft would probably be alright as well; Uber shares rose more than Lyft’s own, but the presentation helped its smaller domestic rival regain some altitude in the public markets. Uber shares rose from $14.82 per share on March 18 to $20.49 the next day. By March 26, Uber was worth over $28 per share, nearly doubling its value after it promised not to run out of money.
April 2020: Uber withdrew its guidance for 2020. TechCrunch notes that the firm had not removed its Q4 2020 adjusted EBITDA promise, oddly, just its full-year stuff.
April 2020: A little over a week before earnings, news breaks that Uber’s long-time CTO is leaving the company, and that the firm is contemplating layoffs of as many as 20% of its workforce (Uber did not respond to a request for updated comment by the time of publication.) In pre-market trading this morning, the next day, shares of Uber are up 1.63% to $30.60 per share. Lyft shares are up about the same amount.
As you can see, Uber has held onto its recent gains; investors have actually let shares of the company appreciate since its we won’t run out of cash lecture. If the company can keep its profitability promise, investors may be heartened. But if the company has to yank that as well, and reports a quarter that falls under investor expectation, its fortunes could turn once again.
So we’re, again, at a turning point for Uber. What happened in Q1? What does it expect to happen in Q2 and the rest of 2020? Can it still make money? Does it need to jettison a fifth of its staff to do so? We’ll know more very soon.